Which of the following costs are not considered in a differential analysis for a make-or-buy decision?
A)Indirect materials and indirect labor if the item is purchased
B)Direct materials and direct labor if the item is manufactured internally
C)Variable overhead if the item is purchased
D)Fixed overhead that will continue if the item is purchased
E)Fixed overhead that can be avoided if the item is purchased

Question

Quizplus · Accepted Answer

Fixed overhead that will continue if the item is purchased is not considered in a differential analysis for a make-or-buy decision. Only relevant costs that differ between making or buying the item should be considered, and fixed overhead that will continue regardless of the decision does not change based on the alternative chosen.

Which of the Following Costs Are Not Considered in a Differential